Zimmer Reports First Quarter 2007 Financial Results
Zimmer Holdings, Inc. (NYSE: ZMH; SWX: ZMH) today reported financial results for the quarter ended March 31, 2007. For the quarter, the Company announced net sales of $950 million, an increase of 10% reported and 8% constant currency, exceeding management guidance of $932 million and First Call estimates of $934 million. Of the $18 million in sales above management guidance, less than $2 million can be attributed to foreign exchange, while $16 million came from underlying constant currency growth. Diluted earnings per share for the quarter were $0.98 reported and adjusted, exceeding First Call earnings estimates of $0.93 adjusted. The $0.98 in earnings per share reflect strong sales and operational results. The earnings per share effect of share repurchases in the quarter was de minimis.
"We're very pleased to start off the year with a quarter that exceeded both our guidance and Wall Street's expectations for sales and earnings performance," said Ray Elliott, Zimmer Chairman, President and CEO. "We recently concluded our most successful American Academy of Orthopaedic Surgeons meeting ever in terms of attendance at our educational sessions and traffic through our booth. Our reconstructive sales continued to build momentum, led by more than 14,000 implantations of our Zimmer® Gender Solutions™ Knee, exceeding our previously increased aspirations of 12,000."
During the quarter, the Company initiated its first intensive direct-to- patient marketing campaign in support of the Gender Solutions Knee. Television advertising has been launched in 23 target markets in the United States, including New York, Chicago and San Francisco, and will run through the first half of 2007. Since January, more than 200,000 hits have been received at the Company's new internet site, www.GenderKnee.com. At the AAOS meeting in February, the Company debuted its first gender-specific hip replacement system, the Zimmer® Gender Solutions™ M/L Taper Stem with Kinectiv™ Technology, which it expects to launch in the third quarter of this year, followed by the Zimmer Gender Solutions VerSys® Epoch® Hip Prosthesis in early 2008.
The Company previously announced that it would acquire Endius, Inc., a privately held pioneer in the development of breakthrough minimally invasive spine surgery products, implants and techniques. This acquisition was subsequently completed in April. In a separate transaction, the Company acquired the intellectual property rights, inventory and associated assets of the Cyclone® Anterior Cervical Plate System, a versatile, low-profile ACP system that complements the Company's existing Zimmer Spine product offering.
"We continue to execute our strategic plan to Enable, Innovate and Grow, which focuses on key opportunities now and in the future," said Elliott. "We believe that our Gender Solutions knee fosters an important dialogue between women and their physicians, and our investments in spinal technologies should improve our ability to compete for growth in that robust market. The introduction of the BRIGIT™ Bone Resection Instrument Guide in late 2007 will provide a SmartTool for the operating room that should enhance accuracy for total joint replacement while significantly reducing instrument costs for both the hospital and Zimmer. We are laying the groundwork for our future in biologics with an expected fourth quarter launch of DeNovo® NT Natural Tissue Graft. Moreover, we have added clinical trial sites to our study of DeNovo® ET Engineered Tissue Graft, which is designed to potentially replace articular cartilage."
In the quarter, the Company purchased 2.1 million common shares for a total of $173 million as part of a $1 billion repurchase program, which was announced in 2005 and expires December 31, 2007. Purchases under this program are now 14.2 million shares for a total of nearly $1 billion. A second $1 billion repurchase program was authorized by the Board of Directors in December 2006 with an expiration date of December 31, 2008.
Note on Non-GAAP Financial Measures
As used in this press release, the term "adjusted" refers to operating performance measures that exclude acquisition, integration and other expenses. The term "constant currency" refers to any financial measure that excludes the effect of changes in foreign currency exchange rates. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measure are included in this press release.
Zimmer Safe Harbor Statement
This press release contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 based on current expectations, estimates, forecasts and projections about the orthopaedics industry, management's beliefs and assumptions made by management. Forward-looking statements may be identified by the use of forward-looking terms such as "may," "will," "expects," "believes," "anticipates," "plans," "estimates," "projects," "assumes," "guides," "targets," "forecasts," and "seeks" or the negative of such terms or other variations on such terms or comparable terminology. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that could cause actual outcomes and results to differ materially. These risks and uncertainties include, but are not limited to, our ability to successfully integrate acquired businesses, the outcome of the Department of Justice investigations announced in March 2005 and June 2006, price and product competition, rapid technological development, demographic changes, dependence on new product development, the mix of our products and services, supply and prices of raw materials and products, customer demand for our products and services, control of costs and expenses, our ability to conduct a successful search for a new chief executive officer and the ability of the new chief executive officer to gain proficiency in leading our company, our ability to form and implement alliances, international growth, governmental laws and regulations affecting our U.S. and international businesses, including tax obligations and risks, product liability and intellectual property litigation losses, reimbursement levels from third-party payors, general industry and market conditions and growth rates and general domestic and international economic conditions including interest rate and currency exchange rate fluctuations. For a further list and description of such risks and uncertainties, see our periodic reports filed with the U.S. Securities and Exchange Commission. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be set forth in our periodic reports. Readers of this document are cautioned not to place undue reliance on these forward-looking statements, since, while we believe the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. This cautionary statement is applicable to all forward-looking statements contained in this document.
